It looks like the sun is coming out over the Brazilian market as the first national scale deal in more than a year is expected to hit by the end of this month.

Grupo Odebrecht is bringing the second-ever financial future flow to the Brazilian market this month, to the tune of R175 million (U.S. $75 million). The deal marks the first financial future flow in two-and-a half years. The Marlin Group, an affiliate of Petrobras, issued the first financial future flow back in 1999.

While the Brazilian cross-border market seemed to be jumping last year, all was quiet on the local securitization home front. "The Argentine situation makes the local markets more volatile in interest rates and in exchange rates, so there was a lot of uncertainties surrounding Latin America," said Juan Pablo De Mollein, an analyst at Standard and Poor's in Buenos Aires. "Only the cross-border transactions with external credit enhancements such as credit policies or multi-lateral guarantees were able to be issued last year."

In this transaction Trikem SA, a part of Grupo Odebrecht, has a contract with Monsanto Nordeste SA and OPP Qumica SA, also a part of Grupo Odebrecht, has a contract with Borealis. In these contracts, Grupo Odebrecht's two companies have agreed to sell raw material chemical products to Monsanto and Borealis. In turn, Trikem and OPP will sell the receivables from these contracts to a Brazilian onshore trust called Multichem Trust. The onshore trust will then issue notes in the Brazilian market. The credit enhancements are provided by the overcollateralization and the reserve fund of approximately one interest payment. Additionally, the transaction will be sold in four pari passu tranches. S&P has provided a national scale brAA' rating to all four classes.

According to Mollein, there will be more local transactions this year, particularly in the first half of the year, as the coming elections at year-end will likely slow the market in the second half of the year. While investors were wary of Brazil last year in the face of the Argentine crisis, the mindset appears to have changed. "Investors are seeing that the Argentine situation is getting worse and Brazil has not been affected," said Mollein. "So after a couple of months, the market has realized the situation and probably will not penalize issuers with higher costs. They could ask for an increase in interest rates but only because of the risk within a transaction, not because of Argentina or other countries in the Latin American region."

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